Page 3 - WSAAG092_The Evolution of HECM
P. 3
Non-Borrowing Spouse Protections
HUD implements comprehensive new safeguards for non-
2014
borrowing spouses. To remain in the home after the HECM
borrower dies, the nonborrowing spouse must meet certain
conditions, such as showing proof of marriage status at the
time the loan was taken out, proving legal ownership, and
complying with all existing loan terms.
Financial Assessment
Improving with Age
To reduce borrower defaults, HUD implements Financial
2015 Assessment, requiring lenders to conduct a thorough
What started as an idea 30 years ago, and then analysis of borrowers’ income sources and credit history to
became a demonstration that proved itself to ensure they can meet the loan’s ongoing obligations, such
Congress and the American people, has since as the upkeep of the property and payment of property
launched into a powerful and useful financial taxes and homeowners insurance. HUD also clarifies the
instrument for tens of thousands of seniors 2014 rules that allow non-borrowing spouses to stay in the
seeking a responsible way to tap into a portion of home after the borrower dies or leaves the home.
their home equity, which has now reached over
$10 trillion.
The HECM has continued to evolve and improve, 2016
and while it won’t be the financial solution for The FHA insures its 1,000,000th HECM
every senior who wants to increase their cash flow
or simply have more money for their retirement
— supplementing another income stream such as
Social Security or a retirement plan — it should be Three essential innovations are
part of every financial planning discussion. implemented to strengthen the loan:
2017 n
New Upfront Insurance Premiums:
The new rate of 2% is an increase from 0.5% for borrowers
who took 60% or less of their loan proceeds upfront and a
decrease from 2.5% for borrowers who took more than 60%
of their loan proceeds upfront.
Annual Insurance Premiums:
n
The new rate of 0.5% is a decrease from 1.25%.
Principal Limit Factors:
n
The factors, based primarily on age and prevailing market
interest rates, were adjusted, leaving borrowers with more
home equity but fewer loan proceeds. These adjustments
further protect borrowers, lenders, and the sustainability of
the FHA’s insurance fund.
Lenders are required to provide a second independent
property appraisal in cases where the FHA determines there
2018 may be inflated property valuations. This new action further
strengthens the financial foundation of the FHA’s reverse
mortgage program, which is contingent upon an accurate
determination of the value and condition of the borrower’s
property being used as collateral for the loan.
